Americans Continue to Believe Falsehoods About the Economy

Inflation has come down significantly, unemployment remains low, data indicates real wages are rising faster than inflation, and especially compared to most nations in the world, America's economy is humming along a fast clip.  Yet the mindless media and millions of Americans continue to whine and complain about the economy.  Worse yet, Republicans continue to pump out lies about the economic situation which is threatened by the GOP's constant threats to shutdown the government and the turmoil that would entail even as they threaten cuts to Social Security and once again to repeal Obamacare -moves that would truly make individuals' economic situation worse. Yes, home mortgage rates remain high putting a pinch on homebuyers, but rates are still nowhere near the heights once seen.    As an economist lays out in a column in the New York Time, this refusal to see reality is dumbfounding, especially among so-called progressives who want perfection even as their whining and hand ringing potentially sets the stage for a far worse reality should Republicans regain the White House and continue to control of the House of Representatives.   Here are column highlights:

There are two big questions right now about the U.S. economy. One is why it’s doing so well. The other is why so many Americans insist that it’s terrible.

I have no illusions about persuading conservatives that the economy is in good shape; their minds are made up, and pointing out facts at odds with their views just makes them angry.

But there also seem to be a significant number of progressives unwilling, for different reasons, to accept the good news. And this group, at least, might be willing to listen to arguments that President Biden has accomplished more than they realize, as well as the proposition that half a loaf is better than none and much better than what Biden’s opponents will do if given the chance.

About the good economic news: This week two excellent economic reports were added to the pile. On Wednesday, the Bureau of Labor Statistics reported that in the third quarter, labor productivity rose at an annual rate of 5.2 percent, which is really, really fast. It’s too soon to call a trend, but there is increasing reason to hope that our economy is capable of growing considerably faster than we previously thought.

Oh, and unit labor costs are up only 1.6 percent over the past year, another indicator that inflation is coming under control.

Another report showed that unfilled job openings are down. Last year many economists were arguing that the high level of vacancies meant that we needed high unemployment to control inflation. That gap has now largely disappeared, one of many signs that the economy is healing from the disruptions brought on by the Covid pandemic. And this process of healing explains why we’ve been able to get inflation down without a recession or a surge in unemployment.

Nonetheless, many Americans continue to have very negative views of the economy. Some of this may reflect the fact that while inflation has come way down, prices are still high compared with the recent past. This effect may wear off over time; as I wrote not long ago, there has to be some statute of limitations on how far back people look for their sense of what things should cost. One interesting recent analysis suggests that it takes around two years for lower inflation to be reflected in consumer sentiment, in which case Americans might be feeling better about the economy in time for next year’s elections.

On the other hand, inflation has been a global phenomenon, but the huge gap between favorable economic indicators and grim public perceptions is unique to the United States, where people believe many bad things about the economy that simply aren’t true.

I can report from experience that talking about these issues with people on the right is basically impossible. Point out that most workers’ earnings have significantly outpaced inflation since the eve of the pandemic, and they’ll say you’re a member of the elite who has no idea what things really cost. Point out that Americans are more likely than not to express positive views about their family’s own financial situation and that strong consumer spending belies claims that families are suffering, and they’ll say you’re a snob telling people how to feel. It’s a no-win situation.

One group that might be amenable to persuasion, however, is progressives unwilling to acknowledge good economic news because they say that there’s still a lot wrong with America. I don’t know how large this group is, but I seem to know a lot of them, and their negativity may be affecting the general tone of conversation.

To be sure, Biden’s America isn’t a progressive paradise. Too much wealth and power is still concentrated in the hands of a few people, even as millions of this rich nation’s citizens still live in poverty and lack adequate health care.

But there has nonetheless been real progress. . . . And things would look even better if Democrats had won even a slightly bigger victory in the 2020 elections. Notably, just one or two more Democratic senators would have meant a permanent extension of the expanded child tax credit, which would have sharply reduced child poverty — and still could, if Democrats find a way to win big in 2024.

Furthermore, consider the alternatives. Over the past few months, Republican policy discourse has taken a hard right turn, with renewed pledges to repeal Obamacare — threatening health insurance coverage for more than 40 million Americans — and a push for cuts to Social Security.

So here’s how I see it: The results of Biden’s victory in 2020 have fallen well short of progressives’ dreams, but a Biden defeat next year would be the stuff of progressive nightmares. Are left-leaning Americans able to hold both facts in their minds and act appropriately?